Now, offline stores also buy products from Flipkart, Amazon to resell them at market prices

Small offline traders have accounted for more than 20% of the total sales of smartphones and FMCG products by online marketplaces this festive season.Writankar Mukherjee&Ratna Bhushan | ET Bureau | October 16, 2017, 07:36 IST

Paytm Mall had earlier said it would spend Rs 1,000 crore on marketing, cashbacks and promotional spending during the festive season.NEW DELHI: The Flipkart-Amazon-Paytm Mall discounting frenzy this festive season has a new breed of online buyers — neighbourhood cellphone stores and kiranas, which are buying products from these websites to resell them to consumers later at market prices.

Many of these brick-and-mortar stores have created 5-10, or even more, user accounts on these e-commerce platforms to overcome restrictions on the number of discounted units and cashback that a user can avail of, four senior industry executives said.

These small offline traders have accounted for more than 20% of the total sales of smartphones and FMCG products by online marketplaces this festive season, they said. In most cases, the prices that the e-commerce sites are offering are either below or at par with those at which offline distributors procure stocks from the brands, they added.

The most popular smartphone brands which are lapped up by such traders include the iPhone, Oppo, Vivo, Redmi, Motorola and Samsung, which are available on either deep discounts on Amazon and Flipkart or on massive cash backs on Paytm Mall. In FMCG, retailers are mostly buying hi-value and bundled packs across categories like detergents, soaps, sanitary pads, diapers, sauces, chocolates, juices and snacks on which the discounts are the highest.

“The online discounting this time has been far too much, especially in some categories and products. In fact, in a few smartphone models, it (price on e-commerce sites) is even below the distributor price. Hence, several smaller retailers are buying it online,” said Retailers Association of India, chief executive, Kumar Rajagopalan. It is difficult to understand how the sellers on the marketplaces are able to sell at such low prices and the association will take it up with the government, he added.

Emails sent to Amazon, Flipkart and Paytm Mall did not elicit any response till press time Sunday. Paytm Mall had earlier said it would spend Rs 1,000 crore on marketing, cashbacks and promotional spending during the festive season. Some companies like Lenovo-Motorola and Xiaomi supported the brick-and-mortar retailers by offering discounts for offline customers on their popular models to match the online prices during the first sale at Navaratra and during the current Diwali-Dhanteras offers.

“However, Amazon has been selling several smartphone models on deep discount and Paytm Mall is running massive discount and cashback offers up to 20% all through the festive season, whereby there has been price disruption prompting several retailers to purchase from these sites,” said Saurav Bhattacharya, who owns a distribution company for smartphones.

FMCG companies, in fact, are seeing a repeat of the trend when retail chains used to offer a massive discount during the early days, prompting kiranas to buy from them. However, this time the discounts are much higher.

“In case of e-commerce, the trend is most pronounced. We try to prevent this by supplying low-unit packs for general trade and high-value ones for e-commerce and modern trade. But we have got to know that the kiranas are cutting open bundled packs and selling on MRP at their smaller stores,” a senior executive at a leading personal care firm said.

Mayank Shah, marketing head of the country’s leading biscuit maker, Parle Products, said: “A parallel distribution channel is being created, which is leading to lack of equilibrium through the distributor-retailer trade channels. In the long term, this can get disruptive.” A senior executive of a distributor of a large Gurgaon-based multinational consumer goods firm said with stocks coming into stores through other channels, authorised distributors were getting short-changed.

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